Into every practice, a little rain must fall. Or, in this case, unemployment claims. Whether these claims strike as a single raindrop or a full-fledged storm, they can be confusing, even for seasoned managers. Some managers even avoid terminating employees because they're afraid the employee will file a claim for unemployment benefits and the employer's Unemployment Insurance (UI) tax rate will go up. But in many cases you can fight unemployment claims successfully, regardless of whether you terminate employees or they've quit.

First, let's examine the circumstances in which an employee qualifies for benefits. Employees are entitled to unemployment benefits if they've lost their job due to lack of work, if their job was eliminated, if the company went out of business, or if they were terminated due to performance or job qualifications. In most cases, employees aren't entitled to unemployment benefits when they're terminated for violating a company policy, rule, or procedure; when they get into a dispute with their co-workers or boss; or when they quit. The benefit eligibility will vary from state to state, so it's best to check individual state labor department websites for a complete list of reasons.

Why claims matter

Most hospital managers know that paying out unemployment claims will ultimately cost your practice money, even through your practice doesn't directly pay the claim. This is the biggest reason you'll want to limit the number of claims made by former employees. The amount your practice pays out in claims is reflected in your unemployment insurance (UI) rate.

UI rates vary by state. A practice's UI rate will also vary based on how often former employees have collected unemployment benefits. If you've paid a number of claims, your UI rate will likely be higher. This can make a huge impact on the amount of UI tax a practice has to pay out each payroll period. The following example will illustrate how much savings a company could realize by reducing its rate.

In the state of New York, the UI tax rates range from 1.5 percent to 9.9 percent. The UI tax rate is charged on the first $8,500 of each employee's earnings (see "Example: Unemployment Insurance Rates" above).

Because a practice's UI tax rate is determined by its claims, the higher the number of paid claims, the higher the tax rate. Keeping a low UI tax rate can save a practice thousands of dollars a year. That savings can allow you to offer more benefits, increase salaries, or afford new equipment. Being diligent about fighting inappropriate claims leaves more money to spend on your most valuable resource: your hardworking team members.